Question 1

The advantage of the allowance method of accounting for bad debts is that it identifies the customers who won't pay their bills.

Accepted Answer

A) True 
 B)False

Question 2

The allowance method complies with the generally accepted accounting principle of matching.

Accepted Answer

A) True 
 B)False

Question 3

Explain the difference between estimating the amount of uncollectible accounts using the approaches based on percent of sales and accounts receivable.

Accepted Answer

The percent of sales approach emphasizes

Question 4

Quality of receivables refers to

Accepted Answer

A)  The creditworthiness of the customers 
B)  The speed of collection 
C)  The likelihood of collection 
D)  Sales turnover 
E)  The speed and likelihood of collection 
A)  The creditworthiness of the customers 
B)  The speed of collection 
C)  The likelihood of collection 
D)  Sales turnover 
E)  The speed and likelihood of collection

Question 5

In October, Z-Mart had $475,000 in net credit sales and $75,000 in accounts receivable. Calculate the days' sales uncollected for October.

Accepted Answer

The answer of In October, Z-Mart had $475,000 in net...

Question 6

Augusto Diaz borrowed $1,000 and signed a 6-month promissory note at 11% interest. The total amount of interest is $110.00.

Accepted Answer

A) True 
 B)False

Question 7

The use of the bad debt and allowance accounts is required under which accounting concept?

Accepted Answer

A)  The revenue recognition principle 
B)  The matching principle 
C)  The materiality principle 
D)  The monetary unit principle 
E)  Cost principle 
A)  The revenue recognition principle 
B)  The matching principle 
C)  The materiality principle 
D)  The monetary unit principle 
E)  Cost principle

Question 8

A promissory note is a written promise to pay a specified amount of money either on demand or at a definite future date.

Accepted Answer

A) True 
 B)False

Question 9

The days' sales uncollected ratio

Accepted Answer

A)  Measures how much time is likely to pass before a company receives cash receipts from credit sales equal to the current amount of accounts receivable 
B)  Is used to compare a company to other companies in the same industry 
C)  Is used to compare between current and prior periods 
D)  Is used to compare a company to other companies in the same industry and is used to compare between current and prior periods 
E)  All of these 
A)  Measures how much time is likely to pass before a company receives cash receipts from credit sales equal to the current amount of accounts receivable 
B)  Is used to compare a company to other companies in the same industry 
C)  Is used to compare between current and prior periods 
D)  Is used to compare a company to other companies in the same industry and is used to compare between current and prior periods 
E)  All of these

Question 10

The maturity date of a note receivable

Accepted Answer

A)  Is the day of the credit sale 
B)  Is the day the note was signed 
C)  Is the day the note is due to be paid 
D)  Is the date of the first payment 
E)  Is the last day of the month 
A)  Is the day of the credit sale 
B)  Is the day the note was signed 
C)  Is the day the note is due to be paid 
D)  Is the date of the first payment 
E)  Is the last day of the month

Question 11

Peter Corporation reported the following account balances for 2018. Peter has a January to December fiscal year:
 $$\begin{array} { | l | r | } 
\hline \text { Accounts Receivable at Jan 1, 2018 (debit) } & \$ 40,000 \
\hline \text { Allowance for Doubtful Accounts at Jarn } 1,2018 \text { (credit) } & \$ 6,000 \
\hline \text { Total credit sales during } 2018 & \$ 200,000 \
\hline \text { Total collections on accourts receivable during } 2018 & \$ 180,000 \
\hline \text { Uncollectible accounts writter off durirg } 2018 & \$ 10,000 \
\hline
\end{array}$$ Peter Corporation estimates that 2% of credit sales should be used to allow for bad debts.
-Assuming that Peter Corporation has a December 31 year-end, prepare the adjusting entry at December 31, 2021 for doubtful accounts.

Accepted Answer

.02 × $200

Question 12

Peter Corporation reported the following account balances for 2018. Peter has a January to December fiscal year:
 $$\begin{array} { | l | r | } 
\hline \text { Accounts Receivable at Jan 1, 2018 (debit) } & \$ 40,000 \
\hline \text { Allowance for Doubtful Accounts at Jarn } 1,2018 \text { (credit) } & \$ 6,000 \
\hline \text { Total credit sales during } 2018 & \$ 200,000 \
\hline \text { Total collections on accourts receivable during } 2018 & \$ 180,000 \
\hline \text { Uncollectible accounts writter off durirg } 2018 & \$ 10,000 \
\hline
\end{array}$$ Peter Corporation estimates that 2% of credit sales should be used to allow for bad debts.
-Prepare a partial balance sheet at December 31, 2021 for the accounts receivable section only, showing the accounts receivable at gross, the allowance for doubtful accounts and accounts receivable at net.
Peter Corporation
Balance Sheet (Partial) At Dec 31, 2021

Accepted Answer

The answer of Peter Corporation reported the following account balances...

Question 13

The practice of placing dishonoured notes receivable into Accounts Receivable keeps only current notes receivable in the Notes Receivable account.

Accepted Answer

A) True 
 B)False

Question 14

The matching principle requires that accrued interest on outstanding accounts receivable be recorded at the end of an accounting period.

Accepted Answer

A) True 
 B)False

Question 15

The days' sales uncollected ratio is calculated by dividing accounts receivable by net sales and multiplying the answer by 365.

Accepted Answer

A) True 
 B)False

Question 16

A company can raise cash by borrowing money, and then factoring its accounts receivable as security for the loan.

Accepted Answer

A) True 
 B)False

Question 17

As long as a company accurately records credit sales information, it is not necessary to have accounts for specific customers.

Accepted Answer

A) True 
 B)False

Question 18

A contingent liability

Accepted Answer

A)  Is another name for a long-term liability 
B)  Only arise when accounts receivable are factored 
C)  Arise when a note receivable is discounted without recourse 
D)  Is an obligation to make a future payment if a certain future event occurs 
E)  Is an obligation to make a future payment if an uncertain future event occurs 
A)  Is another name for a long-term liability 
B)  Only arise when accounts receivable are factored 
C)  Arise when a note receivable is discounted without recourse 
D)  Is an obligation to make a future payment if a certain future event occurs 
E)  Is an obligation to make a future payment if an uncertain future event occurs

Question 19

Kader Company had the following balances on January 1, 2020:
 $\begin{array}{|l|r|}
\hline \text { Allowance for doubtful accounts } & \$ 2,600 \
\hline \text { Notes receivable } & 56,000\
\hline
\end{array}$ Prepare general journal entries for the following transactions of Kader Company:
 $\begin{array}{|l|l|l|}
\hline \text { Mar. } & 21 & \begin{array}{l}
\text { Discounted a } \$ 10,000,9 \%, 120 \text {-day note dated March } 1 \text {, received from } \
\text { Creed Corp, at the bank at } 12 \% .
\end{array} \
\hline & & \
\hline \text { Apr. } & 25 & \begin{array}{l}
\text { Sold } \$ 4,500 \text { of merchandise to Finn Corp., receiving a } 10 \%, 60 \text { - day note } \
\text { receivable. }
\end{array} \
\hline \text { May } & 10 & \text { Wrote off } \$ 1,800 \text { account owed by Friller as worthless. } \
\hline \text { June } & 24 & \text { Note signed by Finn Corp. on April } 25 \text { was dishonoured. } \
\hline & 29& \begin{array}{l}
\text { Received a memo from the bank that the note discounted on March } 21 \
\text { Was collected }
\end{array} \
\hline \text { Dec. } & 31& \text { Uncollectible accounts receivable were estimated to be } \$ 3,200 \text {. } \
\hline
\end{array}$

Accepted Answer

The answer of Kader Company had the following balances on...

Question 20

Explain why the allowance method satisfies the matching principle.

Accepted Answer

The allowance method recognizes the bad

The advantage of the allowance method of accounting for bad debts is that it identifies the customers who won't pay their bills.

The allowance method complies with the generally accepted accounting principle of matching.

Explain the difference between estimating the amount of uncollectible accounts using the approaches based on percent of sales and accounts receivable.

Quality of receivables refers to

In October, Z-Mart had $475,000 in net credit sales and $75,000 in accounts receivable. Calculate the days' sales uncollected for October.

Augusto Diaz borrowed $1,000 and signed a 6-month promissory note at 11% interest. The total amount of interest is $110.00.

The use of the bad debt and allowance accounts is required under which accounting concept?

A promissory note is a written promise to pay a specified amount of money either on demand or at a definite future date.

The days' sales uncollected ratio

The maturity date of a note receivable

The practice of placing dishonoured notes receivable into Accounts Receivable keeps only current notes receivable in the Notes Receivable account.

The matching principle requires that accrued interest on outstanding accounts receivable be recorded at the end of an accounting period.

The days' sales uncollected ratio is calculated by dividing accounts receivable by net sales and multiplying the answer by 365.

A company can raise cash by borrowing money, and then factoring its accounts receivable as security for the loan.

As long as a company accurately records credit sales information, it is not necessary to have accounts for specific customers.

A contingent liability

Explain why the allowance method satisfies the matching principle.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts for Financial Statements

Completing the Accounting Cycle and Classifying Accounts

Accounting for Merchandising Activities

Inventory Costing and Valuation

Internal Control and Cash

Property, Plant and Equipment Intangibles

Payroll Liabilities

Accounting Information Systems

Filters

Exam 8: Receivables

The advantage of the allowance method of accounting for bad debts is that it identifies the customers who won't pay their bills.

The allowance method complies with the generally accepted accounting principle of matching.

Explain the difference between estimating the amount of uncollectible accounts using the approaches based on percent of sales and accounts receivable.

Quality of receivables refers to

In October, Z-Mart had $475,000 in net credit sales and $75,000 in accounts receivable. Calculate the days' sales uncollected for October.

Augusto Diaz borrowed $1,000 and signed a 6-month promissory note at 11% interest. The total amount of interest is $110.00.

The use of the bad debt and allowance accounts is required under which accounting concept?

A promissory note is a written promise to pay a specified amount of money either on demand or at a definite future date.

The days' sales uncollected ratio

The maturity date of a note receivable

The practice of placing dishonoured notes receivable into Accounts Receivable keeps only current notes receivable in the Notes Receivable account.

The matching principle requires that accrued interest on outstanding accounts receivable be recorded at the end of an accounting period.

The days' sales uncollected ratio is calculated by dividing accounts receivable by net sales and multiplying the answer by 365.

A company can raise cash by borrowing money, and then factoring its accounts receivable as security for the loan.

As long as a company accurately records credit sales information, it is not necessary to have accounts for specific customers.

A contingent liability

Explain why the allowance method satisfies the matching principle.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts for Financial Statements

Completing the Accounting Cycle and Classifying Accounts

Accounting for Merchandising Activities

Inventory Costing and Valuation

Internal Control and Cash

Property, Plant and Equipment Intangibles

Payroll Liabilities

Accounting Information Systems

Filters